In the year 1816, Congress chartered the Second Bank of the United States (BUS) as the depository of federal funds. This National Bank also had the power to issue currency that circulated as legal tender, in addition to the notes of the states' banks. This, of course, was a very controversial topic. Did Congress have the right to create a National Bank? Even though the Bank was controlled by private stockholders, the people of the United States were quick to blame the Bank for the failure of the state banks in the depression of 1818. The answer, then, was to impose a great tax on "any bank not chartered within the state"- AKA, the Second Bank of the United States.
Beginnings of McCulloch v. Maryland
While many states believed BUS to be the source of their banking issues, Maryland was the only one to do anything about it- they were the only state to impose a tax on the federal bank. However, when they came to collect the tax from the Bank's Baltimore branch, cashier James McCullock and the Bank refused to pay it. As a result Maryland sued McCulloch, who responded saying the tax was unconstitutional. Both the state court and the court of appeals ruled in favor of Maryland, but the U.S. Supreme Court, led by Chief Justice Marshall, decided to review the case in 1819.
Ruling of the Marshall Court
The Supreme Court's ruling was unanimous and written by Chief Justice Marshall. The first part of the decision was a ruling in favor of the Bank, saying that the Maryland tax was unconstitutional. The Court cited the Necessary and Proper
Clause of Article I, Section 8, which expressly grants Congress the power to pass laws "necessary and proper" for the execution of its "enumerated powers." Congress had been given the power to regulate interstate commerce, collect taxes, and borrow money. The Bank was needed for this purpose.
In addition, the decision stated that states do not have the power to tax the Bank, as according to Article VI of the Constitution, the government, though limited in its power, "is supreme within its sphere of action." By taxing the Bank, the state was trying to undermine the superior laws of the Federal government.
Finally, the Court held that the political authority of the union lies with people of the Union, not the states that comprise it, and that the government is for, by, and of the people. By taxing the Bank, the state of Maryland was taxing all the people in the United States, even though it had authority over only those living in Maryland.
Impact
The case of Marbury v. Madison in 1803 promised that the Supreme Court was going to take great care in shaping the laws of the land. McCulloch v. Maryland was the first time that promise was fulfilled. It is considered the most powerful decision to ever come out of one case: not only did it expand the Congress' power to those merely implied by the Constitution, but also decidedly set the states as inferior to the Union, and proved the constitutional sovereignty of the federal government. No other case has ever affected the United States so much in the years since, and it helped to prove the power of the Supreme Court, especially under the rule of Chief Justice John Marshall.
Sectionalism
This entire case is based on the idea of Nationalism vs. Sectionalism. The idea behind sectionalism when discussing the government is the concept that there is a divide between the federal and state governments. Sectionalists wish for a great divide and strong local leadership. Nationalists wish for a united country, with a powerful federal level. In McCulloch v. Maryland, the relation between states and the Union was set once and for all: The federal government had more power than individual states, and did in fact have the power to create things like large, national banks. Institutions like these are designed partly in order to unite the entire country, one of the goals of nationalists. Yet even though this case helped set once and for all the idea of a more powerful central Union, many today still believe that a more powerful state government is the key to real independence and freedom.
McCulloch v. Maryland (1819)
Background
In the year 1816, Congress chartered the Second Bank of the United States (BUS) as the depository of federal funds. This National Bank also had the power to issue currency that circulated as legal tender, in addition to the notes of the states' banks. This, of course, was a very controversial topic. Did Congress have the right to create a National Bank? Even though the Bank was controlled by private stockholders, the people of the United States were quick to blame the Bank for the failure of the state banks in the depression of 1818. The answer, then, was to impose a great tax on "any bank not chartered within the state"- AKA, the Second Bank of the United States.Beginnings of McCulloch v. Maryland
While many states believed BUS to be the source of their banking issues, Maryland was the only one to do anything about it- they were the only state to impose a tax on the federal bank. However, when they came to collect the tax from the Bank's Baltimore branch, cashier James McCullock and the Bank refused to pay it. As a result Maryland sued McCulloch, who responded saying the tax was unconstitutional. Both the state court and the court of appeals ruled in favor of Maryland, but the U.S. Supreme Court, led by Chief Justice Marshall, decided to review the case in 1819.Ruling of the Marshall Court
The Supreme Court's ruling was unanimous and written by Chief Justice Marshall. The first part of the decision was a ruling in favor of the Bank, saying that the Maryland tax was unconstitutional. The Court cited the Necessary and ProperClause of Article I, Section 8, which expressly grants Congress the power to pass laws "necessary and proper" for the execution of its "enumerated powers." Congress had been given the power to regulate interstate commerce, collect taxes, and borrow money. The Bank was needed for this purpose.
In addition, the decision stated that states do not have the power to tax the Bank, as according to Article VI of the Constitution, the government, though limited in its power, "is supreme within its sphere of action." By taxing the Bank, the state was trying to undermine the superior laws of the Federal government.
Finally, the Court held that the political authority of the union lies with people of the Union, not the states that comprise it, and that the government is for, by, and of the people. By taxing the Bank, the state of Maryland was taxing all the people in the United States, even though it had authority over only those living in Maryland.
Impact
The case of Marbury v. Madison in 1803 promised that the Supreme Court was going to take great care in shaping the laws of the land. McCulloch v. Maryland was the first time that promise was fulfilled. It is considered the most powerful decision to ever come out of one case: not only did it expand the Congress' power to those merely implied by the Constitution, but also decidedly set the states as inferior to the Union, and proved the constitutional sovereignty of the federal government. No other case has ever affected the United States so much in the years since, and it helped to prove the power of the Supreme Court, especially under the rule of Chief Justice John Marshall.Sectionalism
This entire case is based on the idea of Nationalism vs. Sectionalism. The idea behind sectionalism when discussing the government is the concept that there is a divide between the federal and state governments. Sectionalists wish for a great divide and strong local leadership. Nationalists wish for a united country, with a powerful federal level. In McCulloch v. Maryland, the relation between states and the Union was set once and for all: The federal government had more power than individual states, and did in fact have the power to create things like large, national banks. Institutions like these are designed partly in order to unite the entire country, one of the goals of nationalists. Yet even though this case helped set once and for all the idea of a more powerful central Union, many today still believe that a more powerful state government is the key to real independence and freedom.Click here for a 2-minute video summary of McCulloch v. Maryland